I've been aware of the legal issues involved in virtual world platforms for quite some time. On the least "worldy" end of the spectrum, you have massively multiplayer online games (MMOGs) like World of Warcraft. Blizzard Entertainment, the company that developed and maintains World of Warcraft has taken many steps to curtail the active secondary market that re-sells in-game currency, items and so called "levelling services," all of which allow players to spend real-world dollars to speed up their advancement within the game itself.
On the other end of the spectrum, you have virtual world platforms like Linden Lab's offering, Second Life. Second Life was a media darling a few years ago, as media outlets caught on the fact that Linden Lab wasn't just running a game client, but was allowing users to monetize their creations, as well as speculate in virtual real estate. Reuters even went so far as to open a "branch" office within Second Life.
A recent article in the Washington Post has me thinking about virtual property again. How is it relevant to our practice at Sulaiman & Associates? More after the jump.
The Washington Post article doesn't really examine anything new in terms of Second Life -- assuming that you've been aware of the product in the first place. For those who aren't familiar, here's a back-of-the-napkin explanation of Second Life: Second Life is an online, virtual world program where all content is developed by the users. Users retain their intellectual property interests in the content they create. That content can then be re-sold to other users. Users can also purchase virtual real estate, which they can use for their own purposes or rent out to other users. All of this is paid for with Linden dollars. These Linden dollars can then be sold on the secondary market for real U.S. dollars.
Basically, you can theoretically convert pixels and programming code into cold, hard cash.
There are plenty of contract, intellectual property, taxation, gambling and other issues rolled up in this discussion. They have been hashed and rehashed ad infinitum online, and aren't particularly relevant to this post.
What is interesting about this system, at least for our practice, is that we often think of property in the traditional sense -- discreet parcels of land that are in no way interchangeable. This uniqueness of land flows, in part, from the fact that land is a resource with quantifiable scarcity. Once we've covered all of the world's landmass, short of building islands of garbage, there's no more to be had. Not so for Linden Lab. Creating new land is as simple as bringing new servers online. In fact, anyone can buy an entire island for $1000 (USD), which covers server setup fees.
This would seem to ultimately de-value virtual land holdings. However, barring private islands, Linden Lab is rather deliberate in releasing new land for sale. Moreover, it exerts control over the exchange of Linden dollars for U.S. dollars, allowing it to keep the exchange rate around 250 Linden dollars to every one U.S. dollar. Truth be told, only a small portion of Second Life's users are making a living in the virtual world. Others are simply supplementing real-world income with a more modest income derived from the sale of virtual goods.
What I find interesting about this is that these virtual holdings aren't generally recognized as actual assets. Much like stock options, they are only have value when an individual takes steps to perfect the interest (exercising the option for stock, liquidating the virtual assets and cashing out into USD for virtual property). However, shouldn't someone who is in bankruptcy declare some of that virtual property as an asset? Is it exempt? Certainly, it does function a bit like stock -- the value isn't realized until the security is cashed out.
It's definitely an interesting area of the law, and one that we'll surely see develop over time.
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